Federal Reserve officials will meet on September 25-26 to set monetary policy. It’s widely expected that the Federal Open Market Committee will raise the federal funds target range by another 25 basis points, to 2.00-2.25%. The four Fed governors and twelve district bank presidents will also submit revised projections of growth, unemployment, and inflation, extending out to 2021. This will include a refreshed dot plot (the individual officials’ expectations of the appropriate level of the federal funds rate for the end of each of the next few years). There will be some range in opinions, but we ought to see more of a consensus for the near term. Of course, monetary policy decisions will remain data dependent.
Minutes of the July 31-August 1 FOMC meeting showed that officials “generally expected that GDP growth would likely slow from its second-quarter rate but would still exceed that of potential output.” Data received since that meeting confirm that view. “Many participants suggested that if incoming data continued to support their current economic outlook, it would likely soon be appropriate to take another step in removing policy accommodation.” The minutes showed some concerns about trade policy, but worries had not had a significant impact on capital expenditures. Business expectations remain generally robust. Hence, barring some catastrophic external event, the FOMC is almost certain to raise rates on September 26.